According to the State of Tax Justice 2024 report prepared by the Tax Justice Network, due to the profit transfer of multinational companies and the offshore tax regulations of rich people, countries are expected to pay 416 billion euros (492 billion euros) each year. $) is estimated to have lost tax revenue.
the United Kingdom, Overseas Territories and Royal Dependencies. %By creating its 26’, it is ranked as the largest contributor to global tax revenue losses.
The report highlights the risk that Europe and its jurisdictions will collectively erode the corporate tax base at a global level. %Turns out he's connected to more than 70 ’ines.
Which European jurisdictions are most frequently used in international tax planning structures? Which countries play an important role in the implementation of such practices? So where do the current rules make it easier for companies to minimize their tax liabilities?
What does the corporate tax haven index measure?
The Corporate Tax Paradise Index (CTHI) assesses jurisdictions based on how much they contribute to enabling multinational companies to shift profits and reduce tax payments, using a points and indicator system developed by the Tax Justice Network.
The CTHI value of a jurisdiction reflects the extent of its involvement in facilitating the erosion of the global corporate tax base, as calculated by the index. According to the 2024 report, countries are ranked according to the scale and aggressiveness of their tax systems in offering opportunities to avoid corporate taxation.
’'s network of Overseas Territories and Royal Dependencies stands out prominently. The British Virgin Islands, Cayman Islands and Bermuda are in the top three in the index, each scoring over 2,400 points.
Among European countries, Switzerland has the highest score outside the UK network (2,279), while the Netherlands (1,945) has the highest score within the European Union.
EuropeTax risks in ’'s leading economies
Among ’'s top five economies, the United Kingdom (894) has the highest CTHI, followed by France (883). Germany scored 590 points, while Spain scored 557 points. Italy performs best with 342 points; because a lower score points to better performance in limiting corporate tax avoidance.
UK and its networks behind a third of global tax avoidance risk
The CTHI Share is a critical metric that measures the rate of global corporate tax avoidance risk attributed to each jurisdiction. The UK and its Overseas Territories and Royal Dependencies network are responsible for one-third of global corporate tax avoidance risks, while EU countries are responsible for one-third.
If we consider in more detail, the risks of global corporate tax avoidance .7’sini comprises only three British Overseas Territories: the British Virgin Islands (British Virgin Islands%7,1), Cayman Islands (cayman Islands)%6,7) and Bermuda (%5,8).
In comparison, the United Kingdom’ itself is only %With a share of 2.1’, Europe still has the highest share of ’'s five largest economies, making it %It is followed by France with 2.1.
Germany and Spain respectively %1.4 and %While having similar shares with 1.3, Italy has only %Responsible for 0.8’.
Switzerland’'s share %It is 5.3’. European ’'s total share, including other European countries and their respective jurisdictions %Reaching 72’.
Tax haven score ranking
The Haven Score is another important indicator used in the report. Measures the extent to which the laws and regulations of a jurisdiction create opportunities to avoid corporate taxation, whether intentional or not.
2024’te, United Kingdom’'s Overseas Territories and Royal Dependencies network ranked first in the ranking, with eight jurisdictions receiving 100’, the highest score possible. United Kingdom’ has a score of 59’.
Outside the UK network, Switzerland (89) has the highest Haven Score in Europe ’, while Ireland and Cyprus (both 79) are leaders within the EU. Portugal has the lowest score with 46 points.
Where does financial activity take place?
In 2021 alone, multinationals are estimated to have shifted profits of €1.2 trillion to regions with low or no tax rates, leading to a loss of €294 billion in direct tax revenues from governments globally.
Global Scale Weight is another indicator that measures how much of the financial activity carried out by multinational companies enters or exits a particular jurisdiction.
the European and Overseas Regions of Global Financial Activities ’ini, while the United Kingdom and its network %It has the largest individual share with 16.
Netherlands among individual European countries %It has the highest weighing weight with 11.1 and weighs %It is followed by Luxembourg with 8.8. the United Kingdom (United Kingdom%8,3), Germany (%4,2), Switzerland and Ireland (both %3,4) and France (%3,1) is also among the European countries with the highest weighing weight.
Lowest legal and documented tax rates
When a country offers special tax incentives or privileged tax regulations to multinational companies, these companies are often forced to pay significantly less than the statutory corporate tax rate on their profits. This can lead to much lower effective tax rates, known as the Lowest Current Corporate Income Tax Rate (LACIT). This measure is produced by the Tax Justice Network through the analysis of potential legal inequalities and tax planning strategies.
According to OECD’, the UKOverseas Territories and Royal Dependencies of ’The statutory corporate tax rate is zero in all eight of ’. However, there are significant differences between legal rates in various jurisdictions and the lowest available corporate income tax rates (LACIT) documented.
The difference between legal corporate tax rates and LACIT rates highlights the potential of tax planning strategies that can result in much lower effective rates. For example, the legal rate in Luxembourg’ %LACIT only when 24.9 %It is 0.3’.
SwitzerlandLegal rate in ’ ,7against ’ %The difference in ’ is 2.6 LACIT’ and in Ireland %It's almost zero against 12.5’. History of Belgium against ’ %While showing a difference of 3’, Malta ’ legal rate and only %It has the largest gap with 5’ LACIT.
In the Netherlands, for LACIT gainst ’e %It contrasts sharply with the statutory rate of 25.8’. Legal rates in overseas regions such as Aruba and Curaçao %the 20 ’den %It's dropping to ’a.
